Castrol India Ltd

Letter from the Chairman

Dear Shareholders,

Warm greetings!

As I pen my final message as the Chairman of your Board, I reflect upon the events of FY 2023 and the two decades preceding. I look back with satisfaction at the collaborative journey we've undertaken at Castrol India Limited.

The year FY 2023

FY 2023 presented its share of challenges. Volatile raw material markets, fueled by global events, tested our agility. However, through proactive management and a deep understanding of market forces, we maintained stability, navigating uncertainty with unwavering dedication. This is not a cause for nervousness but a recognition that such disruptions are now part of our regular landscape, and we need to remain prepared to adapt and thrive. Managing a company like ours demands a delicate balance, encompassing multiple priorities: navigating volatile raw materials, adapting to rapid market shifts, and seizing transformative opportunities. Inspired by nature's blend of agility and resilience, we strive to achieve this delicate balance.

A legacy of growth and shared success

Since Castrol India's inception as a public entity in 1983, our growth has been nothing short of remarkable. Under the leadership of esteemed individuals like Mr. Barman, Susim Datta, and accomplished managing directors like Ram Savoor, Naveen Kshatriya, Ravi Kirpalani, Omer Dormen, and now Sandeep Sangwan, your company has consistently thrived. Having joined during the 2000 merger of TATA-bp Lubricants India Limited, I have had the privilege of contributing to this enduring legacy. My heartfelt gratitude extends to all our shareholders for their steadfast support, which has been instrumental in our success.

From the early post-IPO years to FY 2023, Castrol India has demonstrated remarkable progress, reflected in our compounded annual growth rate of around 12% for revenue and 16% Profit Before Tax (PBT). To draw an analogy, an initial investment of INR 100 made in 1983 has yielded significant returns of approximately over INR 4 lakh, including a dividend exceeding INR 1 lakh. Our unwavering commitment remains to deliver consistent performance and create enduring value for our shareholders. Drawing from my nearly 57 years of corporate experience and over 37 years serving on various Boards, I firmly believe that our robust management team and diverse Board have yielded significant results. While we humbly acknowledge areas for improvement, our resolve remains steadfast in our pursuit of continuous progress.

Resilience through global challenges

Stability during challenges and strategic advancement during calm periods—that's the hallmark of our journey. Over two decades, we have navigated global challenges like the Iraq war, the 2007 financial crisis, the COVID-19 pandemic, and recent conflicts in Ukraine and Gaza. Each event, individually episodic, collectively underscores our resilience. Notably, our revenue and profit have experienced substantial growth, with revenue increasing from INR 1,171 crores in 2003 to INR 5,075 crores in FY 2023, and profit before tax increasing from INR 204 crores to INR 1,181 crores over the same period, while dividend outflows surged from INR 102 crores to INR 643 crores. Over the past decade, your company maintained a revenue CAGR of 4.8% and PBT CAGR of 4.5%, despite the global pandemic's impact. Notably, in the last three years, we've achieved significant growth, with a revenue CAGR of 19.2% and PBT CAGR of 14.6%, demonstrating our resilience and commitment to delivering results.

Adapting to an evolving landscape

The evolving landscape, marked by shifts in vehicle mobility, upgraded emission standards, and the rise of electric vehicles, remains firmly within our purview. In the coming years, anticipate hearing more about our strategic plans to solidify our position not only in the Indian lubricant market but also in the broader automotive sector. Our commitment is unmistakable, as evidenced by our promising investments like Ki Mobility Ventures.

A heartfelt farewell and optimistic outlook

As I draw this letter to a close, my heartfelt gratitude extends to the management, employees, shareholders, partners, vendors, and our diverse Board of Directors for their unwavering support. I remain deeply optimistic about the journey ahead, propelled by our unwavering commitment to excellence, quality, and a forward-looking vision. Thank you all for being an integral part of Castrol India's remarkable journey.

Reflecting with gratitude on a year of resilience and excellence

Letter from the Managing Director

Dear valued shareholders,

In the tumultuous waves of global disruptions and fluctuating crude prices in FY 2023, your Company not only survived but thrived, strategically navigating challenges. The results? Soaring performance metrics—a 6.0% growth in revenue and 6.0% increase in profits (y-o-y), which serves as a testament to our resilience and strategic prowess. Amid adversity, our global facelift wasn't just a rebrand; it was a statement—a bold declaration that we are not just adapting but evolving.

Milestones and progress: Our shared achievements

Your Company's journey in FY 2023 has been marked by shared achievements and progress. From impactful product launches and campaigns to expanding our reach and penetration, prioritising sustainability, and forging partnerships to drive growth, your commitment to our shared vision has been the catalyst for success.

New product launches and brand enhancement

From the launch and placement of the auto care product range in 21,000 outlets and e-commerce platforms, the triumph of MAGNATEC SUV 5W-30, and the redefinition of commercial vehicle oils with Castrol CRB ESSENTIAL has all been exhilarating. Strategic campaigns such as #BadhteRahoAagey, Pragati Ki Paathshaala and India's Ultimate MotoStar resonate with the spirit of progress we embrace. And they are a promise backed by a substantial INR 129 Crores advertising spend.

Reaching far and wide: Connecting communities

Expanding our reach into over 1,220 rural villages and establishing 79 express change outlets wasn't just about business—it was about connecting with diverse communities. Your Company's service and maintenance network, now spanning 1,200+ multi-branded passenger car service centres and 5,500+ bike points, is a testament to the relationships we've built together.

Sustainability and social impact: Making a difference

Our commitment to sustainability isn't just about numbers; it's about making a real impact. Transitioning to 30% PCR in small bottles, reducing plastic consumption, and achieving carbon emission reductions are strides towards a better future. Our Castrol ON EV transmission fluids, available on various e-commerce platforms, contribute to a sustainable future. Initiatives like Castrol Sarathi Mitra, Castrol Eklavya, and Ujjwal Kal underline your Company's commitment to social welfare.

Digital innovations: Shaping the future

Digitisation took centre stage as your Company implemented cutting-edge digital tools and apps. With the Super Mechanic Learning Academy, we have already empowered 18,000+ mechanics, with a goal of impacting over 5,00,000 mechanics across India.

Nurturing partnerships: Strengthening established and emerging collaborations

Our strategic partnerships with Ki Mobility Solutions (KMS), Mahindra Insurance Brokers Limited (MIBL), and Uber elevate our market influence, providing enhanced aftermarket services, insurance options, and maintenance solutions to enrich customer experiences and drive industry impact.

Safety first: A steady commitment

Our commitment to safety remains resolute. Your Company's plants in Paharpur and Patalganga sustained safe operations. I am proud to state that our Castrol Complete CMS sites celebrated 11 years of recordable injury-free operations. Notably, there were no on-site or at-work life-changing injuries and fatalities, underscoring our relentless focus on ensuring the well-being of our workforce.

125 years of excellence: Celebrating the Castrol Global journey

As Castrol Global celebrates 125 years in 2024, our 115-year Indian legacy stands as a testament to enduring excellence. Over these years, we've achieved technological milestones and created a special place in the hearts of countless Indian families, spreading smiles across the nation. Embracing the strategy ‘Onward, Upward, Forward,' we celebrate your Company's rich history and propel into a future of continuous growth, contributing to innovation and relevance.

In the spirit of celebrating our excellence, we are proud to announce this year's dividend excellence as well. With a final dividend of INR 4.50 per equity share for FY 2023, taking the total dividend for FY 2023 to INR 7.50 per share, we express our commitment to shareholder value and gratitude for your enduring support. Pending approval at our 46^th AGM, this dividend underscores our dedication to rewarding our shareholders for their trust and confidence in_Castrol_India.

Looking forward: Together towards the future

As we look ahead, I am filled with optimism. The transition to electric vehicles (EVs) and your Company's collaborative efforts with OEMs showcase our commitment to the future. Our EV readiness training exemplify our forward-thinking approach to sustainable mobility. By training over 1000 mechanics till date, we not only equip them for the future but also contribute to a sustainable and greener mode of transportation.

A heartfelt thank you!

In closing, I extend heartfelt gratitude for your continued trust and support. Together, we've overcome challenges and set the stage for a promising future. Our journey is a testament to the power of unity, shared values, and a common vision. Our commitment to excellence, safety, and sustainability remains steadfast as we move ahead.